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Archive for September 1st, 2012

With the holidays over and September now upon us, we are entering one of the two busiest periods in the calendar for residential property transactions. Some of you might think you there is little or nothing required to become an estate agent or auctioneer, that you could go down to the zoo in Phoenix Park, pick out any old monkey, strategically shave it, teach it to suppress its urges to throw and consume its own faeces, show it how to open a door and wave its arm around as if indicating and hey presto, you’d have an estate agent. But there’s more to flogging homes than that; requires all sorts of skills, though not arithmetic seemingly.

“Ronan O’Driscoll, director of residential property with estate agents Savills Ireland, said a property tax based on valuation would hit Dublin hardest, and south Dublin in particular. He added: “We don’t know yet what the rate will be but if it is, say, half of one per cent of the value, then a very-good-quality home in Dublin, valued at €500,000, would mean an annual bill of €1,000.”” Savills supreme Ronan O’Driscollreported in last week’s Sunday Independent.

Oh my! With criticism like this, you will no doubt have been expecting a stellar performance from the company which owns the Sunday Independent and a host of other Irish news papers. But when Independent News and Media yesterday published its accounts for the first half of 2012, it revealed a €177m loss! That’s more than all other Irish media companies combined. And its advertising is down 6%, the same as RTE’s.

But unlike RTE, IN&M is balance sheet insolvent with its liabilities exceeding its assets by over €200m. And it has over €400m of bank debt!

The only media companies seemingly making money in Ireland at present are UTV and Johnston Press – both British companies. RTE, TV3, Communicorp which operates Newstalk and Today FM, the Irish Times, Crosbie Holdings which publishes the Examiner and Sunday Business Post, and Independent News and Media are all practically basket cases with IN&M being the biggest basket case of all, which ironically doesn’t stop it being the most shouty when it comes to criticising the performance of rivals…

J’accuse of the Week

The new economist at the Central Bank of Ireland was in action during the week when he gave a speech at an accountants’ do. Lars Frisell’s speech referred to the desirability of some form of debt forgiveness for mortgages and also called for bondholders to be burned as part of a future system for managing banks. The transcript of his speech is not available but the Central Bank has kindlyprovided copies of the slides used , and there is some interesting information in there. But this is the first time I have seen the perpetrators of the banking crisis set out in this form, which is noteworthy. What is equally noteworthy is that there has been little sanction for any of the perpetrators – yes Fianna Fail was voted out of government two and half years after crisis erupted, yes some CEOs of banks resigned with generous payouts, yes the former Financial Regulator and Governor of the Central Bank went, but not without jaw-dropping recompense.

Graph of the Week

Last week the Department of Finance published its monthly note on deposits in Irish banks which tend to depict a stabilising picture of household and business deposits. The data includes deposits at overseas branches of banks, so the Bank of Ireland joint venture with the UK Post Office tends to distort the figures but overall the picture is positive. What was noteworthy was the graph on the dependence of Irish banks on central bank funding. We are no longer where we were in late 2010, and indeed our use of ECB funding is now pretty much in line with our economy proportional to the EurZone’s. Good to remind the ECB of that fact…

Table of the Week

Yesterday Eurostat published its monthly data on unemployment across Europe which shows a dismal picture across the continent with Ireland’s vertiginous unemployment rate of 14.9% making only the Top 5.

Economic lowpoint of the Week

Kevin Bakhurst joins RTE this month as news and current affairs boss. He will bring a wealth of rigour and experience garnered from his career with BBC News. Kevin arrives in the wake of the mini-clearout after the Prime Time defamation of Father Reynolds, and we all hope that certain news and current affairs strands will be improved with better fact-checking, research, balance and perhaps most important of all, coherency. Kevin might also examine why RTE has a seemingly random approach to reporting economic matters. A month ago, RTE headlined the 0.2% improvement in the GDP outlook for 2012 as forecast by the Central Bank, but yet RTE completely ignored the European Commission forecast this week which lowered 2012 GDP to 0.4% but also reduced the 2013 forecast from 1.9% to 1.4%. Of course, forecasts come and go, but if the European Commission is on the money, then Budget 2013 may not be the toughest between now and 2016!

Although we no longer get a monthly full foreclosure list from NAMA which will show the additional properties foreclosed during the most recent month, NAMA has deigned to add a little title to its foreclosure section of its website which today says “Complete Listing as at 31st of July 2012” and we can now see that there are 1,281 properties in their foreclosure system compared with 1,229 last month. Of course there might be some properties removed, perhaps sold so we can’t automatically deduce that just 52 properties have been added.

So what is new this month?

Who knows Who can tell. Certainly not NAMA. You’ll have to search all 129 pages of the listing yourself and even then you won’t see the date upon which property was added.

In many ways, the new foreclosure feature added by NAMA at the end of July 2012 was a retrograde step because you can no longer get a listing which you can convert to see which receivers and estate agents are getting business. And most infuriatingly, you cannot see new property. The foreclosure section of NAMA’s website is the most visited part of the NAMA.ie website, and it seems NAMA remains determined to make it difficult to see what it has to sell.

It was Professor Karl Whelan of UCD who recently catapulted back into the national debate the subject of that infamous letter sent by former president of the ECB, Jean-Claude Trichet to our then-Minister for Finance Brian Lenihan in November 2010. This followed freedom of information-type requests for correspondence between the two, by Gavin Sheridan to the ECB itself late last year and by the Independent newspaper to our own Department of Finance – both journalistic endeavours were unfruitful, with both the ECB and Department of Finance opting to closely guard the contents of the correspondence which occurred at a critical juncture in Ireland’s history on the eve of requesting an international bailout.

Today, the Irish Times publishes two feature articles on letters it claims “to have seen” – here and here. It has been established that there are definitely three letters from Jean-Claude to Brian on 15th October 2010, on 4th November 2010 and 19th November 2010. There remains a mystery over the existence of a letter on 11th or 12th November 2010 – Minister Lenihan alluded to it, but present efforts to locate it have failed. There may also have been emails, faxes and phone calls, the contents of which are not at this point reported. It also needs to be carefully noted that the refusal in writing by the ECB to provide copies of correspondence to Irish journalist Gavin Sheridan, makes no reference to letters on 15th October and 4th November – these are hardly reckless omissions by the ECB.

The three letters which have “been seen” by the Irish Times are indeed threatening but there is no mention whatsoever in today’s reporting of bondholders. It has commonly been believed that the ECB threatened to withhold liquidity funding of Irish banks if Minister Lenihan did not agree to protect bondholders – there is no allusion to this in today’s reports.

The letters are threatening in that they tied the continuation of the ECB continuing to provide liquidity funding, to Ireland seeking a bailout programme. In other words “apply for a bailout with close scrutiny of your finances and actions, or we will withhold cash and your banking system and economy will collapse” This is outrageous.

The ECB has hitherto refused to make public its correspondence during the crucial period of this State’s history. Minister for Finance, Michael Noonan has recently said he would overturn his own Department’s decision in refusing to hand over the letters, though in the limited context of a parliamentary inquiry.

It is now high time for these three acknowledged letters to be published. It is also high time for the details of phone calls, emails, faxes and any other communication between the ECB and the Department of Finance to be made public. Despite the rhetoric, this State is still teetering on the verge of default, to a large extent as a result of the cost of the bank bailout. And within the bank bailout, the cost of repaying certain classes of bondholders may, contrary to claims from some quarters, become the difference between debt sustainability and default.

UPDATE: 1st September, 2012. Journalist Gavin Sheridan has said on Twitter that it “appears the ECB lied” to him when it restricted its response to letters of 18th and 19th November 2010. And remember that the Irish Times reporting today shows that the letter of 19th November 2010 was the least controversial of the three letters seen by that newspaper.